Dell surges on growth forecast

Shares in computer-maker Dell leapt last night after it predicted a return to growth

BY Euan Stuart LAST UPDATED AT 11:33 ON Fri 28 Aug 2009

Dell executives said they could see signs of improvement in the computer industry in late New York trading yesterday, sparking a sharp rally in the company’s shares. The company said the second half would see growth returning as corporates started spending again ahead of 2010 and echoed recent comments at other large technology groups.

Brian Gladden, chief financial officer, said, "We continue to see a very challenging environment, though we do see it stabilising and some pockets of strong demand." However chief executive Michael Dell sounded an optimistic note born of new technology trends, adding “When we look ahead we see a fairly powerful product cycle.”

The optimistic comments came as Dell revealed that sales fell 22 per cent in the last quarter year on year to $12.76bn, however these figures surpassed analysts’ expectations. Net profit for the period was 23 per cent lower at $472m, well ahead of the 63 per cent drop it saw in the first quarter. The company has addressed its falling profitability by reducing its global headcount by 9000 over the last year.

The figures, intended to be announced after the close of the stock market, were instead released half an hour early by mistake on the company’s website. This led to frenzied last minute buying of the company’s shares, pushing its shareprice up seven per cent to $15.65 ahead of the close.

WHAT THEY ARE SAYING:

Richard Kugele, analyst at Needham & Company on BBC.co.uk: "Obviously it's a better-than-expected performance. Slow, steady progress right now is good enough as far as I'm concerned."

Ashok Kumar, analyst with Collins Stewart, in BusinessWeek: "[The results are] about as good as you can expect given the economic backdrop. Enterprise improvement is going to be a 2010 story, and consumer sales are stabilizing." · 

For further concise, balanced comment and analysis on the week's news, try The Week magazine. Subscribe today and get 6 issues completely free.

Read more about